NOVEMBER 2012
Zoning for Distributed Renewable Energy
By: Jim Brueckman, AICP, City of Rochester Hills
For the final edition of the 2012 zoning series, we turn our attention to an issue that many believe will
become more acute in the coming years: distributed renewable energy. Due to a confluence of
varying and interrelated reasons, the demand for renewable energy installations will increase. Those
reasons include the accelerating effects of climate change, increasing cost of fossil fuels, and the
decreasing cost of renewable energy.
Distributed renewable energy, which is installed at small scales on rooftops and other suitable
locations in already developed areas, has many benefits over large, centralized utility-scale
installations. Distributed energy facilities can be built in close proximity to existing transmission
infrastructure in built-up areas, minimizing environmental impacts. Distributed renewable facilities
have no need for transmission infrastructure since they connect directly to the distribution grid, close
to where energy is used. This avoids exorbitant costs associated with the long-distance transmission
of energy, which can comprise nearly 25 percent of the total price a consumer pays for energy.
Additionally, since non-utility, distributed renewable energy projects are usually built on underused
urban spaces and previously degraded land -- such as parking lots, rooftops and abandoned industrial
sites -- distributed generation facilities can help protect pristine and undeveloped environments.
The fact that renewable energy is feasible at nearly any scale means that local communities will have
to determine how to regulate the land use impacts of distributed solar and wind energy systems at
the site level. This article will examine the different scales of renewable energy uses that communities
will have to regulate from a land use perspective, the benefits of distributed renewable energy, and
major non-land use issues that still must be overcome, and will conclude with a discussion of potential
land use standards for such installations.
Community Renewable Energy Systems – the Middle Scale of Distributed Energy
Scales of Renewable Energy Systems
The following graphic summarizes the difference between the scales of renewable energy projects.
For an example of a completed community scale solar energy project, refer to:
http://nwcommunityenergy.org/solar/solar-case-studies/winthrop_solar. The project is located in
Winthrop, Washington, which of course is not the sunniest of states, but the success of that project
serves as an example that community solar projects are feasible in Michigan.
On-Site Renewable Energy Compared to Community Renewable Energy
The easiest and most straightforward way for an end user to benefit from distributed renewable
energy is to install it on-site. Once installed the renewable energy system supplements or displaces
utility-fed energy reducing monthly utility bills and serving as a reliable energy source during power
outages on the utility grid.
However, there are two major limitations to on-site renewable energy: 1.) a large upfront cost that has
to be paid or financed by the homeowner, with the payback time occurring over a period of years or
decades, and 2.) not all sites are suitable for on-site renewable energy. In fact, a 2008 study by the
National Renewable Energy Laboratory found that just 22 to 27% of residential rooftop area is suitable
for hosting an on-site solar energy system.i
Community renewable energy projects overcome these two limitations by allowing for a household to
purchase shares in a project at a level commensurate with what they can afford, and by allowing for
optimal siting of the renewable energy installation. Solar costs have been dropping quickly in recent
years, meaning that on-site solar systems will soon be affordable to a large number of US households,
but site limitations will persist meaning that there will be a continued demand for community-scale
projects as more households seek to take advantage of the benefits of renewable energy ownership.
Community Shared Renewable Energy System Ownership Models
There are three prominent models for community renewable energy systems:

Utility-Sponsored Model: a utility owns or operates a project that is open to voluntary
ratepayer participation. The benefit to subscribers is to offset their own personal electricity
usage.ii

Special Purpose Entity (SPE) Model: individuals join together in a business enterprise to
develop a community shared solar model. The renewable energy project will be hosted onsite at a large energy user (like a large business or institution) who pays the SPE for the energy
used, or the energy is fed back to the grid and the SPE is paid by the utility via net metering.
Eventually the system can be sold to the host. The benefit to subscribers is to offset some or
all of their personal electricity use while also achieving a return on their investment.

Nonprofit Model: a charitable nonprofit corporation administers a community shared
renewable energy project on behalf of donors or members. The nonprofit model operates
nearly identical to a SPE model, with the major differences being in how the business entity
that owns the system is set up: the electricity generated cannot be directly fed to the grid via
net metering; the limitations on the amount of return investors can achieve; and that a nonprofit entity must host the system.
SPE Shared Energy Model: Ownership, Energy, and Payment Flows
Source: A Guide to Community Shared Solar, US Department of Energy
Community-Scale Renewable Energy Overcomes On-Site Limitations
Community renewable energy projects can be the answer for renters, those who have shaded roofs,
and those who cannot afford the up-front cost of a renewable energy system, but still want to take
advantage of the financial and environmental benefits of renewable energy. These systems feature
shared or joint ownership structures, similar to buying shares in a mutual fund. The renewable energy
system is installed on a nearby site that is suitable for a solar or small wind system, and the energy that
is generated is fed back into the grid via net metering or provided to a nearby end user who pays for
the generated energy. The proceeds of the electricity that is generated by the renewable energy
system is paid back to the owners via dividends per share of ownership.
Many communities already have standards that regulate small, on-site renewable energy generation
such as solar panels mounted on a rooftop, and these standards typically treat such systems as an
accessory use or structure to the principal use on the site. At the other end of the scale, many
communities have standards that regulate utility-scale renewable energy systems that sell wholesale
electricity to major utilities. These utility-scale systems include the large 400-foot or taller 2-megawatt
wind turbine farms and large scale solar farms that cover dozens or hundreds of acres. However, very
few communities have standards that address moderately-sized community-scale renewable energy
projects (to date we have not been able to identify any communities in Michigan that have such
standards).
Like many communities, Rochester Hills has standards for on-site and utility scale renewable energy
generation, but do not have standards for community-scale projects. We have begun to work through
the issue ourselves and intend to bring forward amendments to the zoning ordinance to address
community-scale shared renewable energy projects that fall somewhere in between the on-site and
utility scales.
Benefits of and Impediments to Community Shared Renewable Energy
The following is a summation of the major benefits of and remaining impediments to community
shared renewable energy systems. The benefits column summarizes the factors that will continue to
drive demand for shared energy systems, while the impediments column summarizes hurdles that
must be overcome to realize the full potential of shared energy systems.
Benefits
Impediments
Accessibility. Provides individuals who do not
have a suitable site or financial resources for an
on-site system ownership access to renewable
energy
Location. Regulatory impediments can limit
potential locations for community renewable
energy systems.
Energy Democratization. Allows the public to
directly participate in energy ownership, and to
help advance renewable energy implementation.
Resiliency. Moderately-sized community
renewable energy systems are distributed, not
centralized, increasing the resiliency of the
electrical grid by reducing exposure to outages.
Lower Up-Front Costs. The shared ownership
model helps remove cost as a barrier to
renewable energy ownership.
Efficiency. Pooling individual resources in a
The Utility Industry. The utility industry is
governed by inconsistent rules and opaque,
unaccountable institutions, and its workings are
little understood by the average citizen. The
financial benefits of electricity tend to be
centralized in the shareholders and executives of
large utilities, who are resistant to change.
Interconnection Red Tape. Many utilities are
resistant to community shared renewable energy
systems,iii and approval for interconnection and
net metering can take months. In many
instances, utilities are required to allow net
metering for renewable energy generated onsite, but not for community-scale projects.
community scale shared ownership project
allows for optimal site selection to maximize
access to wind or solar energy.
Securities Laws. Today, there is little difference
between setting up a mutual fund and a
community solar project. Both require time,
money, and lawyers. Crowdfunding offers a
promising solution to this issue.
The above benefits of community renewable energy systems are available right now, but the
impediments will require changes to existing rules, laws, and tax incentives. For the time being
community renewable energy systems will face strong headwinds, reducing the likelihood that they
will be implemented in the immediate future. However, it is likely that many of the impediments will
be removed over the coming years, unlocking the potential for community renewable energy
systems.
Considerations for Local Regulation of Community-Scale Distributed Energy
Regulating community renewable energy systems is not radically different than regulating on-site
energy systems, but allowing these systems may require some adjustment to your zoning ordinance.
It is likely that solar systems will be fairly straightforward to permit, but small wind systems will raise
many of the typical issues endemic to wind projects. Even though a community-scale wind project
would use “small wind”iv turbines that are 150 feet tall (or less), they are much more polarizing than
solar projects. Each community will be different in their suitability for, and tolerance of wind projects.
The following table compares and contrasts the typical land use regulation considerations for on-site
versus community-scale renewable energy:
Characteristic
On-Site
Community
Type of Use
Accessory to a principal use
Accessory to a principal use, or as a
principal use
Location
Rooftop or free-standing
Rooftop or free-standing
Energy Capacity
2-6 kWh residential, 5+ kWh
nonresidential
5-80 kWh (typically)
Characteristic
On-Site
Community
Max Height
 Freestanding solar: 10 ft
 Small wind: typically not more than
150 feet at the upper end, but many
communities have much lower
height limits
 Freestanding solar: 20 ft
 Small wind: heights of 120-150 ft. will
be necessary to assure sufficient
generation
Setbacks
 Freestanding solar: often regulated
as accessory structures
 Small wind: typically require setbacks
equal to the height of the tower, or a
multiple of the height of the tower.
 Projects hosted at the site of a large
user can be regulated the same as
accessory on-site uses
 Solar projects that are principal uses
can be held to the setback standards
applicable in the district
 Small wind projects can be held to
specific setback standards that relate
to the height of the towers
To summarize, major elements of ordinance changes to promote community-scale renewable energy
projects should include:

List community distributed renewable energy systems as a principal permitted use subject to
specific standards.

Determine if freestanding systems are desirable in your community. If your community is built
up with limited available land, it is likely that a higher economic return can be realized by
developing available land for other uses. In this case, rooftop solar is the most appropriate
kind of renewable energy location. On the other hand, renewable energy is a very good use
for contaminated sites that are not easily used for other purposes and freestanding renewable
energy installations should be encouraged.

Establish setback requirements for freestanding systems. For solar, the minimum setbacks in
the district can be used. Small wind will require larger setbacks that relate to the height of the
tower.

Consider if landscaping should be required to buffer freestanding solar installations. This will
add a significant cost, so landscape requirements may need to emphasize buffering
landscaping that filters views, rather than screening landscaping that is intended to
completely obscure the view of an installation. Clusters of 3-7 evergreen trees every 75 feet
or so, with canopy trees interspersed can provide buffering. Of course, the location of
landscaping must be carefully considered to as not to shade the surface of the solar panels.
RESOURCES:
i
See Supply Curves for Rooftop Solar PV-Generated Electricity for the United States, National Renewable Energy
Laboratory, November 2008 at www.nrel.gov/docs/fy09osti/44073.pdf
ii
DTE offers a “Green Currents” program where electricity customers can choose to purchase blocks of renewable
energy to offset some or all of their electricity usage. However, this isn’t really a community shared ownership
system, as the customer simply pays more for electricity and does not enjoy any of the benefits of ownership,
which still flow to the utility.
iii
By way of example, see http://grist.org/climate-energy/utilities-beat-back-community-solar-bill-in-california/
for a description of how 2 of the 3 largest utilities in California opposed legislation to help advance community
solar energy systems.
iv
Small wind refers to small-scale wind turbines that generate 50 kilowatts or lower, and usually are
mounted on towers that are up to a maximum of 150 feet tall (similar to the height of a cell tower). By
contrast, utility-scale wind turbines generate 2+ megawatts of electricity and have heights of 400 feet
or more. Small wind is usually considered to be most suitable at large urban and suburban sites, and
in rural areas. Many communities object to wind installations in residential neighborhoods.
Series author Jim Breuckman , AICP, is the Manager of Planning for the City of Rochester Hills. Jim has been
a professional planner for over 10 years as a consultant with McKenna Associates, and in the public sector
with Rochester Hills. His experience includes preparing and updating master plans and zoning ordinances
for dozens of communities in Michigan, Ohio, and Indiana with an emphasis on practical and realistic
design-based planning and zoning. He has also conducted numerous economic feasibility studies and
market studies for residential, retail, office and industrial uses.